Osborne Pressured as U.K. Slump Seen Deepening in Past Quarter

George Osborne, U.K. chancellor of the exchequer. Photographer: Chris Ratcliffe/Bloomberg

July 23 (Bloomberg) -- George Osborne faced intensifying
scrutiny of his performance as Chancellor of the Exchequer
before the publication of data that might show Britain stayed
mired in recession in the second quarter.

Two polls for newspapers published yesterday showed twice
as many voters want Osborne replaced than the proportion that
would prefer to keep him as finance minister, while the British
Chambers of Commerce said the government’s policies to promote
economic growth are insufficient.

The pressure on the architect of Prime Minister David
Cameron’s signature deficit-cutting strategy precedes a
potential reorganization of the premier’s ministerial team. It
also heralds a week of focus on gross domestic product data due
on July 25, juxtaposed against the fruits of infrastructure
investment as the Olympic Games begin in London two days later.

“I’d like to see a bit more supply-side stuff, I’m sure
that more could be done and I’m sure that the government would
love to do it,” London Mayor Boris Johnson, a member of
Cameron’s Conservative Party, told the BBC’s Andrew Marr show.
“I would like to see a very aggressive campaign for more
infrastructure investment. It can be readily financed, as we’ve
seen with the Olympic Village, with Olympic investments.”

That comment echoed a call from the BCC, a lobby group for
more than 100,000 U.K. businesses.

“The government could act far more boldly to improve the
U.K.’s infrastructure,” BCC Director General John Longworth
wrote in the Observer newspaper. “Since infrastructure
investment here is insulated from the euro-zone crisis -- unlike
exporting -- it would create short-term confidence, jobs in the
medium term and long-term competitiveness.”

Growth Challenge

An indication of the growth challenge faced by Osborne will
come with the release of GDP data predicted by economists to
show contraction for a third consecutive quarter in the three
months through June. The economy shrank 0.2 percent, according
to the median of 36 forecasts in a Bloomberg News survey.

Forty-four percent of voters polled by ComRes Ltd for the
Sunday Mirror and Independent on Sunday said Osborne should be
replaced, while 20 percent said he should remain. A YouGov Plc
poll for the Sunday Times showed 48 percent in favor of Cameron
removing Osborne, with 20 percent wanting to keep him. ComRes
questioned 2,006 voters on July 18 and July 19. YouGov took
1,617 responses on July 19 and July 20.

Mr. Popular

Culture Secretary Jeremy Hunt spoke out in defense of
Osborne on Sky News, while also arguing to be allowed to keep
his own position if Cameron reorganizes the government.

“You don’t become chancellor because you want to be Mr.
Popular,” Hunt said, citing examples of former holders of the
post including Nigel Lawson, who served under Margaret Thatcher.
“George Osborne has been one of the bravest chancellors in
history,” and has “kept Britain out of the firestorm that has
engulfed the euro zone and many other countries.”

Lawson said that Osborne should continue in the job while
relinquishing his role as the government’s chief strategist.

“It might be sensible to give up the formal role and focus
exclusively on his job as chancellor,” he said in an interview
with BBC Radio 4’s Week in Westminster. “His last budget was
not his biggest success.”

After Osborne’s budget in March, the government backed down
over plans to tax hot food and mobile homes, cap tax relief on
charitable donations and increase fuel duties.

Voters in the YouGov poll put Business Secretary Vince
Cable, a member of Cameron’s Liberal Democrat coalition
partners, at the top of the list of who should replace Osborne.

Deficit Strategy

Cable, questioned on economic policy on BBC Radio 4’s World
at One program, said that the government is showing
“flexibility” in its approach to cutting the deficit.

“We know we have to have budget discipline,” he said.
“It’s important to have the credibility of our creditors as
we’re having to borrow very large sums of money in order to
finance the deficit, but it’s got to be done in a sensible way
that reflects the state of the economy.”

Cable refused to rule out the possibility that he could one
day lead the Liberal Democrats, in an interview with the
Financial Times published July 21. Nick Clegg, the current
incumbent in that position who is deputy prime minister, told
the People newspaper that he could consider a coalition with the
opposition Labour Party after the next election.

The lukewarm relationship between lawmakers in the current
coalition government was underlined by Matthew Oakeshott, a
Liberal Democrat member of the House of Lords and a former
Treasury spokesman for the party. Speaking “on coalition
message,” Oakeshott defended Osborne’s record on Sky News.

“Given that he’s had no experience outside the backrooms
of politics, he’s never worked in industry, he’s never worked in
business, I think he’s actually doing a very good job for a
chancellor on work experience,” Oakeshott said in a discussion
with former London mayor Ken Livingstone, a Labour Party member.